INSUBCONTINENT EXCLUSIVE:
Market regulator Sebi is keeping a close watch on the commodity business of Karvy group, whose stock broking business has been barred from
taking on new clients and executing trades for existing ones for allegedly misusing client securities
The Sebi order will not bar the commodity business, which is run by a separate entity, Karvy Comtrade, but the regulator is keeping a close
watch on this business too and will take action if required, said a person aware of the development
"Karvy Comtrade is a separate entity with around 6000-8000 customers per year and is active on MCX, NCDEX and ICEX," said a Karvy official
"The Sebi order is for Karvy Stock Broking."
MCX is the country's largest metals and energy derivatives bourse, NCDEX the largest agri
derivatives exchange and ICEX, a diamond derivatives bourse
While many brokers have merged their commodity arm with the securities business, after commodity derivatives were designated "securities"
by the regulator, some like Karvy continue to operate it as a separate entity or subsidiary
Since the Sebi order is against Karvy Stock Broking, the commodity broking business could continue
However, certain market participants believe that clients of Karvy Comtrade would be a worried lot given the seriousness of the alleged
misuse of client security in the stock broking business
Karvy Comtrade was one of the brokers whose clients long castor had defaulted in margin obligations after the commodity fell in late
The exchange's clearing corporation has recovered the dues from "defaulting" members and so is safe
However, the regulator is keeping the defaulting members under close watch
"The exposure that our clients have had in the castor seeds is not much, and most amounts have been collected, and settled from the clients
The amount yet to be collected is around Rs.5 crore, and for the Karvy group, this is not a significant amount
We are confident of recovery of this amount too, " Karvy had earlier clarified.
